Earnings

Diageo profit rises on strong demand and cost cuts

Key Points
  • The maker of Johnnie Walker Scotch whisky, Smirnoff vodka and Guinness stout said operating profit rose 10% to £4 billion ($4.99 billion) for the year ended June 30.
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We're benefiting from premiumization, Diageo CEO says

Diageo, the world's largest spirits company, reported higher annual profit on Thursday, helped by growth across all its markets, an improved price mix and as it kept a tight lid on costs.

The maker of Johnnie Walker Scotch whisky, Smirnoff vodka and Guinness stout said operating profit rose 9.5% to £4 billion ($4.99 billion) for the year ended June 30.

Diageo CEO Ivan Menezes told CNBC's "Squawk Box Europe" on Thursday that the company's "top line is strong and consistently growing nicely as people are drinking better and want better brands."

Net profit for the year rose 4.6% higher than the previous year at £3.16 billion, while sales rose 5.8% to £12.87 billion, which Menezes said was driven by "broad-based momentum" across geographical regions. The company has approved plans for a capital return of up to £4.5 billion to shareholders for the fiscal period of 2020 to 2022.

Menezes added that Diageo had a "banner year for new product innovation" and has increased its marketing investment in order to drive net sales growth, offsetting costs by improving efficiencies elsewhere.

He also revealed that the company would consider further acquisitions after the "phenomenal growth story" of tequila brands Don Julio and Casa Amigos.

"We've been very active managers of our portfolio, we have a strong balance sheet, we have the appetite to do more, and we are on the lookout to buy more attractive brands to add to the portfolio - but our organic footprint of geographies, categories and brands gives us the ability to continue to grow this business sales in mid single digits and profits faster than that, because we are benefiting from premiumization," he told CNBC.

This is part of a deliberate strategy to increase high-end brands at a faster rate, he explained.

- Reuters contributed to this report.